Category: Daily Market Update

(see all trades this option cycle)

Daily Market Update – February 10, 2014 (9:30 AM)

After least week’s bookend, but opposite triple digit moves to open and close the week we’re left feeling a bit more optimistic than just a week ago.

Whether or not that’s justified is hard to say, but we’re now slowly moving away from the real market movers reporting their earnings and may once again fall prey to speculating about what every little nuance or event means.

This week, for example, Janet Yellen will give Congressional testimony on Tuesday and five other Federal Reserve Governors will be giving addresses. Any of those can slip in a phrase, make a joke or simply use a single word with perceived emphasis that will send traders into fits and take the market with them.

No doubt everyone will want to know how Janet Yellen feels about the past two months of employment statistics, particularly since she seems interested in pursuing a lower unemployment threshold than previously was the case. For traders it also means having to decide whether her intent means that the course of the tapering to Quantitative Easing will be altered.

While we don’t know what she will say when faced with questions we do know that there is alwys some layer of obfuscation in the answers. With Yellen, we just don’t know how much there will be. Maybe she’ll continue the example set by her predecessor and be more decipherable than was his predecessor.

Of course, if there is even the slightest suggestion that the path may be altered that then brings the question as to whether altering that path is good or bad as regards the economy and then whether what’s good or bad for the economy is bad or good for the stock market.

For individual traders it makes absolutely no sense trying to understand that which can’t be understood. Trying to apply logical processes to understand the unpredictable or the illogical is itself illogical.

Given their performance last week, it’s only logical that in hindsight I wish that I had opened more new positions. I don’t think, however, I’m going to be interested in over-compensating this week. While for now it appears that the market is fairly resistant to anything more than a 5% decline in the S&P, the previous pattern has been to erase that loss and go even further on the upside. I think that I will look for a little more evidence that we’ll be on that path rather than assuming we already are on our way.

I would rather miss a percent on the upside than be first on line to capture a few percent on the downside.

With cash at about 34% to start the week but only 6 positions set to expire this week I’m likely to be conservative with cash and will also likely look at weekly options or those that may be able to bypass the February 22, 2014 monthly expiration.

With a number of potentially good dividend plays this week I may also preferentially look in their direction, particularly as volatility has again died down and the premiums are reflecting that to be the case.

In previous weeks the first hour, if the market was moving higher, turned out to be very unreliable in predicting direction for the rest of the day as many investors took the opportunity to secure some profits whenever they could in anticipation of further market declines.

For that reason I will probably be an observer early in the sessions this week and see where this week’s sentiment takes us.

Watching the pre-open market it appears that no one has an idea of where we’re going to start the week. When there’s that little resolve it’s often easier to have an event get blown out of proportion and trigger a mood. Other than potentially being prompted by this week’s scheduled events or something unexpected on the international front, the mood would do well to just stay flat.

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

(see all trades this option cycle)

Daily Market Update – February 7, 2014 (9:00 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by Sunday 12 Noon.

The following outcomes may be possible today:

Assignment:  EBAY, GPS*, MET

Rollover:   BMY, TXN, WAG

Expiration:  AIG, ANF,  CHK, CLF, HFC,

* GPS unexpectedly announced sales, revenues and improved guidance after yesterday’s close, sending stock higher in the after-hours. The decision and announcement to do so was likely made yesterday or after Wednesday’s trading close, as there was a tremendous increase in the remaining time value of the 2/7/14 option on Thursday morning. Additionally, there was a tremendous spike in option volume at about 9:45 AM, accounting for nearly the entire day’s volume, suggesting something substantive occurred between Wednesday’s close and Thursday’s open. The same spike in option premium did not extend into the next week, suggesting that there would be some event occurring prior to the close of the week’s trading.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 6, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 6, 2014 (Close)

Today’s big stories were likely to be inconsequential as far as anything will ever go.

Twitter and Green Mountain Coffee Roasters were grabbing all of the headlines in the morning, which wasn’t necessarily a bad thing, as we awaited tomorrow’s Employment Situation Report.

Why anyone was surprised over the market’s response to Twitter’s earnings report is amazing. No one had any right to expect anything other than some sort of a surprise, unless the market had fully already understood Twitter and had fully discounted all possibilities. Considering that Twitter was a black box even after its IPO and considering the absence of support levels due to its rapid rise in share price, anything could have been possible as earnings were released.

What is surprising is that user engagement is already decreasing. To me it’s also surprising that they have any revenue to report at all, as many have already figured out how to get their commercial Tweets spread through the system through viral campaigns, like the supposed drunken JC Penney Tweeter during the Super Bowl.

Green Mountain is a different story.

It has a long history of making large earnings related moves and it also has a history of either delaying scheduled earnings or releasing some big news that deflects from attention to earnings related detail. Not to mention allegations of accounting irregularities and some questionable activities by its founder and past Chairman and CEO.

In this case, I think there’s a second overlay, as well, as Brian Kelly, the new and untarnished CEO of Green Mountain struck a deal with Coca Cola, his alma mater. He had been a rising star there, named as President and CEO of Coca Cola Refreshments. No small feat.

I wonder if this deal was one of Coca Cola emulating Microsoft when it made its Nokia deal in an effort to secure a potential CEO successor and bringing Stephen Elop, the Nokia CEO and a Microsoft alumnus, back home.

In that case there was also an element of Microsoft sending a lifesaver in Nokia’s direction and given Green Mountain’s core business growth Coca Cola may have done the same.

Today, I’d rather see the market’s engaged in discussing and analyzing these issues than over analyzing what tomorrow’s data may be or trying to guess what direction the market may go in response to the data.

Also, hopefully the European Central Bank’s policy statement this morning will either be a non-event for us or a net positive, as late in the week adverse news is hard to overcome when contracts expire the very next day. In the recent past the ECB has usually sent our markets higher as they’ve followed an accommodative policy, as had our own Federal Reserve.

Interestingly, as our markets have reached that 5% pullback level and we’re nearing the end of earnings season more attention is being placed on government and other economic reports. The response to Monday’s ISM is an example of a response that has otherwise been really muted for the past year. For the most part the only items the market has cared about during the bull run higher have been the FOMC minutes and the Employment Report.

That may be changing as we become used to the idea of a continued taper and as some political dysfunction shows sign of abating and leaving us with fewer manufactured crises.

If we can get a decent employment number tomorrow, and the ADP data yesterday gives some hope for that, suddenly there appears to be less reason to expect a further drop in markets and I’m beginning to feel some optimism going forward.

Based on the way today’s market went, optimism was the call of the day.

That optimism would really take hold if we could also see volatility maintained at this level or even higher. Instead volatility for the broad market decreased, while for some individual stocks and sectors it remains at its recent highs, in fact, even higher than just yesterday. A good example of that is in the retail sector where suddenly good results from L Brands and Kohls have sent this week’s premiums rocketing higher compared to yesterday.

Today, as yesterday, I was looking for possible DOH Trades as well as any early rollovers,  as I wasn’t expecting much exciting to happen and certainly wasn’t expecting an unbridled march higher.

As would happen nothing exciting did happen except that was enough to send the market nearly 200 points higher.

The speculation is that today’s rise was in expectation of tomorrow’s employment numbers which are thought to be spectacular, perhaps in the 300,000 range or more and that the unemployment rate is going to come in at 6.5%.

For those keeping track, 6.5% was one of the thresholds that we were told the FOMC had set when deciding whether to initiate the taper program. Reportedly Janet Yellen prefers a 6% level, so in some wild scenario it could be conceivable that the next FOMC would have announcement of a slowing or postponement of the taper. If the market believes that may be the case today’s gain could vanish.

The speculation about the fun never ends.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 6, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance
for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

(see all trades this option cycle)

Daily Market Update – February 5, 2014 (Close)

This morning the ADP Employment numbers were released.

Ever since they started doing so there’s been lots of disagreement over how accurately ADP’s numbers parallel the government’s Non-farm Payroll statistics that come out two days later. Regardless of the validity of the ADP Report it still has the capability of moving markets.

After last month’s disappointing official numbers the ADP number was pretty much on target for expectations but the market showed some mild disappointment in the pre-open trading, however, it got over that disappointment very quickly.

At this point we’ll have to wait until Friday to have it settled and to see how the market reacts.

About 2 weeks ago I collected some data looking at the relationship, if any, between the Employment Situation Report and market performance. Watching the release of that most recent report and seeing the market react to very disappointing numbers by pushing the market higher got me thinking that it seemed as if the market always went higher with the announcement of those official numbers.

Who knew that in the comfort of my retirement I would actually once again find myself running t-tests?

Looking at 3 years of statistics there was no association between the reporting of data, regardless of its content and how the market did, neither in the week leading up to the report nor the week following. Neither did the day before the report release have any predictive value.

That is unless you looked at the past 18 months.

During that time period there was a statistically significant likelihood that on the week preceding the report and the day preceding the report that the market would move higher.

For those interested in such things the chance that the market went randomly higher on the day of the Employment Situation Report release was less than 4% and less than 2% when considering the prior week.

While that seemed compelling, as with all statistics it helps to look beyond the numbers and try to have an understanding of possible confounders or environmental factors that may have played a role.

Perhaps coincidentally the past 18 months reflected the beginning of the third and final phase of Quantitative Easing.

Because of that possibility I wasn’t terribly excited about being further long the market in anticipation of an additional Employment Situation Report fueled run higher, considering that there appears to also be an association between the announcement of the taper and the market’s fortunes.

In hindsight, starting the week with a 325 point loss seemed to indicate that playing the market for Friday’s report wouldn’t have been a very good idea.

However, about half of the weekly gains seen in Employment Situation Weeks came on the day of the report, suggesting that there might be some advantage to adding long positions prior to Thursday’s close.

While I generally don’t consider index ETF trading, I may look at the possibility of purchasing some SPDR S&P 500 Trust shares with the anticipation of closing the position at the end of Friday’s trading by selling slightly out of the money call options on the position, as premiums are beginning to reflect increasing volatility.

Otherwise, I’m expecting little activity for the remainder of the week, while remaining hopeful that the market shows some stability and even strength as the week comes to a close, as it would be nice to get back to seeing assignments and rollovers just like the old days.

Today was just that kind of day as the market traded in a tight range, something that it had done for most of 2013, but very little of 2014, thus far.

A little telling is that even with today’s very muted action the short term volatility continues to rise and is nearing the October high, which itself was a low high as far as highs go. So the market is still nervous and waiting for any kind of meaningful and sustained move, regardless of direction.

For my part, I hope that this Friday’s performance breaks that recent pattern of downward moving weekly closes and I wouldn’t mind seeing the market take a little r
est at this level, particularly if volatility can stay here or even move a little higher.

There’s nothing wrong with wishing for the best of all worlds. We’ve had it before, why not again?

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 4, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 5, 2014 (9:30 AM)

This morning the ADP Employment numbers were released.

Ever since they started doing so there’s been lots of disagreement over how accurately ADP’s numbers parallel the government’s Non-farm Payroll statistics that come out two days later. Regardless of the validity of the ADP Report it still has the capability of moving markets.

After last month’s disappointing official numbers the ADP number was pretty much on target for expectations but the market showed some mild disappointment in the pre-open trading, however, it got over that disappointment very quickly.

At this point we’ll have to wait until Friday to have it settled and to see how the market reacts.

About 2 weeks ago I collected some data looking at the relationship, if any, between the Employment Situation Report and market performance. Watching the release of that most recent report and seeing the market react to very disappointing numbers by pushing the market higher got me thinking that it seemed as if the market always went higher with the announcement of those official numbers.

Who knew that in the comfort of my retirement I would actually once again find myself running t-tests?

Looking at 3 years of statistics there was no association between the reporting of data, regardless of its content and how the market did, neither in the week leading up to the report nor the week following. Neither did the day before the report release have any predictive value.

That is unless you looked at the past 18 months.

During that time period there was a statistically significant likelihood that on the week preceding the report and the day preceding the report that the market would move higher.

For those interested in such things the chance that the market went randomly higher on the day of the Employment Situation Report release was less than 4% and less than 2% when considering the prior week.

While that seemed compelling, as with all statistics it helps to look beyond the numbers and try to have an understanding of possible confounders or environmental factors that may have played a role.

Perhaps coincidentally the past 18 months reflected the beginning of the third and final phase of Quantitative Easing.

Because of that possibility I wasn’t terribly excited about being further long the market in anticipation of an additional Employment Situation Report fueled run higher, considering that there appears to also be an association between the announcement of the taper and the market’s fortunes.

In hindsight, starting the week with a 325 point loss seemed to indicate that playing the market for Friday’s report wouldn’t have been a very good idea.

However, about half of the weekly gains seen in Employment Situation Weeks came on the day of the report, suggesting that there might be some advantage to adding long positions prior to Thursday’s close.

While I generally don’t consider index ETF trading, I may look at the possibility of purchasing some SPDR S&P 500 Trust shares with the anticipation of closing the position at the end of Friday’s trading by selling slightly out of the money call options on the position, as premiums are beginning to reflect increasing volatility.

Otherwise, I’m expecting little activity for the remainder of the week, while remaining hopeful that the market shows some stability and even strength as the week comes to a close, as it would be nice to get back to seeing assignments and rollovers just like the old days.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 4, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle